NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the underlying rating on the Massachusetts
Port Authority's (MassPort, or the authority) approximately $95.6
million special facilities revenue bonds (BosFuel Project), series 2007
at 'A-'. The bonds are payable solely from facilities rent derived from
a lease between MassPort and BosFuel, a consortium of member carriers
serving at Boston Logan International Airport (Boston Logan or the
airport). The BosFuel project consists of a consolidated fuel storage
and distribution system at the airport to meet the fueling needs of all
aircraft operators.

The Rating Outlook is Stable.

RATIONALE

The rating reflects BosFuel's monopolistic position in providing an
essential service to airlines at Logan Airport. In addition, the credit
benefits from the airport's strong and growing enplanement base which is
served by a diversified mix of carriers. These strong characteristics
are somewhat offset by the limited nature of the revenue stream which is
dependent solely upon carrier rental payments and not the authority's
overall general revenue pledge.

KEY RATING DRIVERS

ESSENTIAL AIRPORT SERVICE: BosFuel has an effective monopoly on jet
fueling services at Boston Logan airport and is viewed as an essential
function to the airlines at the airport.

PROVEN DEMAND AND LIMITED CONCENTRATION: Annual sales are approximately
346 million gallons with 93% coming from BosFuel member carriers. Boston
Logan benefits from a diverse mix of domestic and international
carriers, and has experienced very strong increases in passenger traffic
over the past couple of years. Supporting the credit is the lack of
significant airline fuel consumption concentration, as the largest
carrier marginally exceeds 26% of airport jet-fuel consumption. Still,
the bonds mature in 2038 and demand for jet fuel services could decline
over time.

STRONG STRUCTURAL PROTECTIONS: There is a strong structural framework
between the airlines using the fuel system and the fuel system operator,
including airline reserve deposits and full step-up payments by the
member carriers in cases of defaults or delinquencies from
non-performing carriers. The debt service reserve is fully cash funded
equal to one year of debt service.

ADEQUATE FACILITIES AND MODERATE COSTS: Fuel storage and distribution
assets are adequate to meet projected needs. Estimated net member costs
at about 3.2 cents per gallon in 2013 are marginally higher than peer
fuel facilities but have remained mostly stable in recent years.
Leverage is moderate at 9.4x on a net debt to cash flow available for
debt service basis, and there are only very modest near-term capital
expenditure requirements.

NARROW REVENUE STREAM: The special facility bonds do not have recourse
to the authority's general revenues or fund balances. Only the BosFuel
facilities rental payments paid by airline carriers support the debt
obligation.

RATING SENSITIVITIES

--Significant deterioration in airport operations leading to a material
decline in fuel demand could cause negative rating pressure.

--Carrier defaults or delinquencies in lease payments to BosFuel
resulting in a material decline in financial performance could cause
negative rating migration.

--Significant leverage for capital needs, without an offsetting revenue
increase, could lead to negative rating action if financial metrics
materially decline.

SECURITY

The series 2007 bonds are secured by a limited revenue stream of
facilities rent payments made by Bosfuel under a fuel system lease.
BosFuel collects revenues to support the required lease payments
primarily from jet fuel to its member passenger and cargo carriers. The
bonds are not secured by the general credit of MassPort.

CREDIT UPDATE

The project continues to demonstrate stable operations. Fitch views the
fuel distribution and storage system to be an essential component of
airline operations at Boston Logan airport. The fuel system has been in
successful operation for over 10 years and essentially all of the
original capital improvements associated with fueling system have been
completed with minimal future capital programs anticipated.

Currently, there are more than 20 airline members of BosFuel, accounting
for over 90% of estimated total fuel volume at the airport in 2013. Fuel
volume through the system is estimated at 346 million gallons in 2013, a
2% increase from the prior year. Boston Logan has experienced
essentially flat enplanement growth in fiscal 2013.

Consumption across all operating carriers at Boston Logan is highly
diverse with JetBlue serving as the largest user at 26.3% of estimated
total gallons pumped in 2013, followed by American at 11.5%, Delta at
10.9%, and United Airlines at 11.2%. JetBlue is also the largest carrier
at the airport in fiscal 2013 in terms of enplaned passengers,
representing 26.3% of the total. As was the case in earlier bankruptcy
filings of passenger carriers, the project has the ability to draw on
member reserve deposits in case of delayed payments or withdrawal that
follows a bankruptcy event. Currently, BosFuel retains approximately
$4.6 million in membership reserve deposits which is equivalent to two
months of total facilities charges.

The average cost of BosFuel's operations, excluding terminalling and
pipeline costs, is approximately 3.2 cents per gallon. The average cost
has been relatively stable in recent years and the fiscal 2014 budget
indicates no major increases to project costs.

BosFuel is a Delaware non-stock membership corporation created for the
purpose of operating the fuel distribution system at the airport.
MassPort has granted the corporation an exclusive right to provide
aircraft fueling services at Boston Logan. Membership in the corporation
is open to all airlines serving the airport upon their acceptance of the
interline agreement; however, fueling service is available to all
carriers serving Boston Logan on a non-discriminatory basis with
non-member airlines paying a higher rate.

BosFuel assesses a net facilities charge on all member carriers equal to
its costs of operation, with 90% of the charge based on volume of fuel a
particular carrier pumps through the system relative to the total volume
of fuel pumped through the system and 10% allocated equally on a per
capita charge. While there is not a rate covenant, charges are set to
cover all operating expenses and debt service annually. In the event of
a default by a member carrier, the interline agreement that governs the
consortium includes step-up provisions requiring additional payments
from the non-defaulting airlines, in the form of a loan, to assure full
and timely lease payments. Fitch believes the adequacy of the legal
terms and financial framework of BosFuel has been demonstrated through
its performance, with all payments made on a full and timely basis,
during the recent spate of bankruptcies in the airline industry.

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